The Commerce Commission says it will try to negotiate a settlement for farmers who bought controversial interest rate swaps if it is proven their banks breached the Fair Trading Act.

Commission chairman Mark Berry told Parliament's primary production select committee yesterday that it had widened its investigation into the matter which involved three banks so far.

If it found the swaps were marketed misleadingly, the commission's next step would be to seek compensation, he said.

"It's going to be up to the banks as to whether they want to settle or whether they are going to stand by and let us take it to court."

The swaps were offered to rural and commercial clients from 2005 by various banks, reportedly as a way of hedging against rising interest rates.

But after the global financial crisis, interest rates plunged to historic lows and swaps holders found themselves locked into interest rates of up to 10 per cent, with punitive break fees if they tried to exit.

The case has parallels with Britain where banks were reportedly forced to sell more than $1 billion in assets to compensate clients for similar loan swap losses.

In New Zealand, the Commerce Commission began investigating last August after media reports of farmers with crippling debt problems began to emerge.

So far 42 complaints have been received.

Sources have told Fairfax Media the swaps have cost farmers billions of dollars, but yesterday the commission said it could not give MPs a clear idea of the scale of the problem. The commission's general manager of competition, Kate Morrison, said she had to assume "more than tens of millions" of dollars were involved.

Farmers' advocate Janette Walker, who has championed the case of swap-affected farmers for more than three years, said media coverage had and would encourage more farmers to come forward. In light of what she described as Federated Farmers' "limp-wristed" response to assisting those farmers most affected, she put hundreds of hours into helping those who thought they had been unjustly treated by the banks. "When they said they'd made a decision to do a full investigation I just about fell off my bloody chair! I'm absolutely stoked. I feel slightly vindicated."

Feds president recalls the 80s currency deals

The dairy swaps issue is not the first time farmers have taken a bath on complex financial products, says Federated Farmers president Bruce Wills.

Wills, a former banker, recalls that in the 1980s some banks urged farmers to buy foreign currency at a much lower interest rate than they could get in New Zealand. In some cases it lowered their repayments by a third.

But some farmers found their debts rose substantially when the New Zealand currency devalued.

Others "did very, very well out of borrowing money in Swiss francs and hanging on for a couple of years, but just whether by luck or good management got out of the currency before it fell to bits".